Global brokerage firm Nomura has maintained a ‘Neutral’ rating on Sun Pharma, with a price target of ₹1,850 per share. Nomura noted that Sun Pharma announced the US district court has granted a preliminary injunction filed by Incyte Corporation against Sun Pharma.
This injunction prevents Sun Pharma from launching Leqselvi, a drug for alopecia areata, which received approval from the US Food and Drug Administration in July 2024.
Sun Pharma intends to appeal the district court’s decision.
The foreign brokerage assumes a Leqselvi launch in FY25 and has factored in projected revenues of $10 million, $80 million, and $150 million in FY25F, FY26F, and FY27F, respectively.
The estimated earnings impact from the product is 0.4%, 3.1%, and 5.2% in FY25F, FY26F, and FY27F, respectively.
Citi Research notes that the delay could impact Sun Pharma’s near-term earnings by 3-6% of EPS and may also affect competitive positioning, as rival drugs will have longer-term clinical data by the time Sun’s product reaches the market.
According to Citi, Sun Pharma will not be able to launch the product unless:
1) the appeals court lifts the preliminary injunction, which could take 4-6 months;
2) Sun Pharma wins a favorable verdict in the ‘335 patent litigation, which may take 12 months or more; or
3) the patent ‘335 expires in December 2026, should Sun lose all litigation. The patent ‘335, held by Incyte Corporation, covers deuterated analogs of Ruxolitinib (Jakavi), which Sun Pharma’s Leqselvi may infringe upon.
Citi maintains a ‘Buy’ recommendation on the stock, and a price target of ₹2,080 per share.
Another brokerage UBS continues to have a ‘Buy’ rating on Sun Pharma with a target price of ₹2,450.
UBS mentioned that the preliminary injunction on Leqselvi does not eliminate the opportunity entirely, as a settlement remains a possible option.
Incyte has a tiered royalty arrangement on Eli Lilly’s Olumiant.
Although the Leqselvi launch could be postponed beyond FY25, the net present value (NPV) may remain largely unaffected, the brokerage noted.
“While Sun has announced that it will immediately appeal against the court’s decision, the injunction technically prevents Sun from launching Leqselvi until the court subsequently rules in its favor or till the expiry of Incyte’s ‘335 patent (Dec-26),” Emkay said in a note.
The brokerage noted that the development does not impact its estimated NPV of ₹59 per share for the product, given that the Street’s base case is Sun entering a royalty-based settlement with Incyte in due course, the probability of which has now increased.
“Leqselvi’s EPS contribution in FY26E (marginally dilutive)/FY27E (0.5%) is not meaningful, considering the launch-linked costs that we have built in,” it said.
An FY26 launch continues to be Emkay’s base case.
Shares of Sun Pharma settled 0.51% higher at ₹1,858.40 apiece on November 1.
